other corruption trials. that is it for "studio b" on a tuesday afternoon. wall street is nice today, up more than 1 percent and context on such things. when i need that i turn to neil cavuto. >>neil: thank you, you think this housing bust is over? new evidence that the shingle just hit the fan. get ready, it is getting worse because after $220 billion to fix it the housing is still in a fix and new reports of record number of americans fixing to just rent. many do not see the upside because housing prices do not go up, they go down, and they keep going down. more than 4 percent of the latest quarter and 5 percent in the past year and 34 percent in the past five years and nothing washington does to repair it can stop it. so, in a worrisome trend, a record number of americans are

saying, to hell with it, and the man trying to reverse this fears washington could compound this. charlie, what happened now? >>guest: it will go down, slowly. this like death by a thousand cuts. when you have these artificial measures to hold up the markets and housing, incentives to buy homes, low interest rates, abnormally low interest rates, guess what happens? the bottom line is housing prices are not going up because the economy is only getting marginally better. and the debate you hear in economic circles should we have let the housing market, wall street, all collapse in 2008 and people who are safers bid it up in should we allow that? or do what we did, makeshift

efforts to keep it artificially high or not falling or imploding the evidence is coming clear that we should have let it implode. look at the situation in 1920. we do not hear of the depress of 1920, we had a 12 month recession, depression, steep in 1920 with no artificial measures. we had massive deflation more than we ever did in the great depression. and then the roaring 20's. >>neil: with the best of extensions prolonging the agony, but, washington is going for look at this and say, well, something has to be done, maybe revisit home buyer tax credit and you are saying, leave well enough alone? >>guest: here the problem. people are not buying houses because they are not cheap enough. the market is overvalued. the question is: where do you

get to the point where the market is at some sort of fair value or where people can afford homes, where they did buy them and where banks lend on that credit quality and risk. it only happens when prices fall real low. it hurts, it is painful, but it is better than weighing 10 -- waiting 10 years. there was a reason we had a great depression. there was a constitutional police in the 19 30's that did not work and it prolonged the agony. that how markets work they fall fast and people bid them up. it is pain on the way down. but you hope the pain is over quickly. the 1920 depression is worth studying because prices came back up, people get employed. we cannot compare the 19 20's to now but there is something about

letting prices fall fast and bid them up. >>neil: so prices have a ways to go down. >>guest: a lot. >>neil: this could be like what happened in japan with a 20 year real estate problem? >>guest: the same thing, trying to get things going and artificially inflating houses prices, look what going on in washington, a huge debate over the foreclosure crisis, the scandal where people were not given due process because they had the automatic robo's and 99 percent those foreclosed upon could not pay their bills. it is prolonging the agony, if they are not out of the homes and a lot of them are not, you cannot tell the home in foreclosure. the price cannot come down. that is the problem. we need to clear the market. you sell things at bow low -- at

below bottom basement prices. this is more pain to come. >>neil: charlie, always good to see you. >>guest: have a good drink. >>neil: usually when so many are throwing in the towel it is a time for investors to dive in. is now that time? dolly? >>guest: i don't see investors moving in. it is too widespread for investors to dive in and save the market. so i don't see that happening. we need to go through the process which may take five years or eight years. >>neil: what if we stop all foreclosure help, stop, and everything stops and we just let it rip. >>guest: you can't do that. can you? just stop everything?

it is a nice idea. but i don't it works if you try to do it. maybe you have something --. >>neil: it is a jolts immediately or prolonged pain. >>guest: we are on a course. it is not good. maybe we need to adjust and address a few issues such as tightening. credit is so tight no one can get a mortgage. it is unbelievable. have qualified people cannot get a north. and those that do, you get a north, guess what? the appraiser screws up the deal so you are not appraised and you cannot get the north. >>neil: but it comes down to jobs, right? >>guest: yes. >>neil: i fine it interesting talking about the housing industry bible one city that saw growth was washington, dc, where government jobs have been increasing and area real estate has been increasing.

>>guest: exactly. literally the only area that increased year over year and in absolute terms. so, yes, employment is the answer. but the employment answer is a tougher answer and proven to be tougher than any other answer. i don't see any good news ahead. employers are doing with less people. why hire more in how do we fix that? >>neil: does it give you pause, you were way ahead of this when people said this was temporary and you were saying, no, it will last and you alienated and now many are in your camp, the majority of them. does any part of you say, well, maybe it is time? >>guest: maybe it is time but how do you implement it in how do you turn off the faucet. >>neil: properties are half of what they were a few year ago. this is a great moment with low

interest rate, great collapse in real estate, and you cannot get much better. >>guest: but if the sword is falling or the knife is falling, it can get better, that is the problem. you can never time the market and sentiment has gone, consumer confidence is down, real estate sentiment is really down. >>neil: what if people just don't want to own anymore. >>guest: why buy that. i believe people want to own. housing stock for sale and rent is different stock. all things equal, people want to own, improve chair -- their house, and stay forever. if you rent, you may have to new. you have no control. >>neil: but they must weigh the risks and decide to role the dice. >>guest: in the short time.

>>neil: there are others who have been saying renting is big again but you don't think it lasts. >>guest: all things equal, people will want to own. in the short term, they may want to rent. this could be five or eight years. it could be. >>neil: it is going from bad to worse today. stocks done and despite today, not a merry month of may, not even close, look at the dow jones industrial average down 2 percent on the month, the worst drop since last august maybe because folks are worried and consumer confidence hitting a six-month low as prices spike and as we have said the value of their homes continues to fall. former congressional budget office director says they have good reason to be concerned. it is a weird end to a weird month. >>guest: well, certainly it

tells us a couple of things. it tells you that the federal reserve's desire to pump up inflation and push investors into risk areas did not generate growth so it is a failure and we are missing a fundamental pro growth strategy. washington's attitude has been, something happens, say foreclosures, and we will implement a policy like taking $20 million for servicing norths. that is misdiagnosing the problem. we need strong robust growth so when it goes bad you can resist. there are a lot of things that could be done. >>neil: are republicans missing, no more health relief and no more mortgage relief, we

are saying tough love is here. >>guest: in the housing market we have a lot of evidence we failed and we should let the market clear. i err with charlie on that. >>neil: does that concern you, that you agree with charlie? >>guest: i am terrified. also there is a lot that can be done. steering directly into financial crisis as the u.s. government is, that is bad policy and republicans on the right try to fix that and get spending controls. we should ratify straight agreements and create jobs. our tax code is not competitive internationally and we have proposals to allow companies to bring back money and hire people and invest. that can improve the jobs climate. if you look at consumer confidence, people get it and are looking at inflation and the jobs and they are not just worried about this month but the future.

>>neil: could republicans, post election, they want a -- they won a safe republican district, the democrats did. when the republicans talk tough love people support it but does it extend to the housing mess, i in the sure but when it is implemented people say, no, no, no, not me. >>guest: the key is, compared to what in if americans understand the status quo is the most dangerous thing for medicare which will go under in a few short years for the federal budget, where medicare is big part of the red ink leading to a crisis and where it threatens jobs, we go under this debt we do not create jobs so doing nothing is the most dangerous and callous thing to proposal. you may not like the republican proposal that came from the house but you cannot defend

doing nothing. for the democrat dozen stay -- democrats to take there is dangerous. >>neil: and the democrats new surprise to say the health care law will apply. and here comes our own judge. [ male announcer ] look at this,

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>>neil: they said "i do," so democrats say don't for supreme court justice to rule on the health care law, to have supreme court justice thomas to vote on this. judge, do they have a case? >>judge napolitano: no, i start out with a couple of "in the interest of," i believe the statute is unconstitutional and i have shared a seminar with justice thomas and consider him a friend. putting that aside --.

>>neil: so i say you have a conflict. >>judge napolitano: the spouses of supreme court justice have the same first amendment rights as the rest of us. the justices don't, they cannot stand on a street corner and take money for expressing political views but their spouses can do the same. and they are presumed to be able to rule on the basis of their own intellect and understanding of the law. >>neil: and you share income as a married couple? >>judge napolitano: you do. >>neil: to you have a vested interest? >>judge napolitano: he could have an interest in keeping the law alive so she can lobby against it, and if the law is invalid her job would go. look, for years the rule was, is there an appearance of impropriety? would an ignorant neutral person say, well, his wife works for

her and so and so is paying the wife if is against the statute, that rule is gone. the rule is, is there a real conflict? does the justice share an interest in the outcome, greater than the interest in justice? does the justice know something about the facts in the case in >>neil: this is wide open. she was at a tea party event and on this issue she deflected. should this be a big issue, settled in court. >>guest: i love that question but i can't help you on that one. >>neil: understand. you knew i would ask. >>guest: liberty central will not do litigation or touch legal issues. >>neil: but everyone knows she is the wife. >>judge napolitano: great questioning. but, unless she is a litigant herself, before the supreme

court of the united states anything she can do anything she must, otherwise the spouses and children and relatives of supreme court justices would be hamstrung. she works for a lobbying organized that does not like the statute but that does not invalidate her husband. >>neil: if you had a recommend involved when you were a judge, a relative, say, either involved in a transaction, having anything to do with the case at hand, you were, what? what i am trying to understand, is there a point where the appearance is enough to step back? >>judge napolitano: this was but that rule is gone. the appearance of impropriety rule does not apply. now it is actual conflict. if justice thomas himself attended meetings with her, or if justice thomas gave advice to her ploys, then he would have a serious conflict but with his wife, that is separate and not a conflict. >>neil: it would be a kicker

if he is for keeping the health care law. >>judge napolitano: that would surprise congressman weiner. justice kagan may have given advice to the obama administration when she was the solicitor general. >>neil: that is fine, but this is not. >>judge napolitano: as to how to crafts a statute to avoid constitutional. she is prohibited great voting on something she dealt with. >>neil: judge, 100 years ago today, today, today, this was the ship, the titanic is launched this day. why are in democrats saying a vote only hours away in the house risks putting us all underwater a century later, to the day?

>>neil: and to hear the democrats history is about to repeat itself, 100 years to the day after the titanic launched, remembering the iceburg no one saw by saying history is repeating itself in washington hours away, an up or down louse vote on raising the debt ceiling expected to fail and to hear the white house tell it, usually darn near calamitous like a titanic. and now, why know why they are voting on this if it is foregone conclusion but the white house

position is it is damaging to consider not raising the debt ceiling. titanic-like. >>guest: the republicans have said, look, the democrats have argued for months and months put your money where your mouth is, you wanted a straight up-or-down vote on increasing the debt ceiling, this will show to you there is not the support to increase the debt ceiling unless there is substantial cuts that outweigh the size of the debt limit increase. the second thing and which is more intriguing, this gives republicans cover. how majority leader, rather, house minority whip thinks this is a vote for republicans to give them cover. nerds, say they get, later, down the road, and there is a deal on raising the debt ceiling, a lot of republicans have to take a tough vote. a lot of the tea party folks do in the want to increase the debt ceiling and they can prove to those back home and the tea

party supporters they voted against increasing the debt ceiling without substantial cuts. >>neil: but is that why hoyer is telling his troops to vote against it? >>guest: absolutely. hoyer was critical of this vote saying house speaker boehner said we need adult moments and he says this in the an adult moment. >>neil: wait, this would have been the adult moment. what changed in to make it childish? >>guest: there is not an agreement. it is interesting that the vote is happening probably around 7:00 tonight when they get to the vote. in three hours after the markets close. they think about the tarp vote in september of 2008, the financial rescue package where the market lost on points in the hour and 778 points during the day and it was near calamity on wall street. they do not want the vote if it is just for show when the market is open. >>neil: but they would be

aware this could cause a problem tomorrow night or in the morning. >>guest: well, by not having it in real time, a real time metric but republicans put out talking points to the members which i oned -- i obtained and there have been nine or ten debt limit increases since 1995 that failed where the marks have -- markets have not fallen and they think this is just a moot vote. not the vote that will make or break the party and will make or break the debt ceiling. >>neil: you are a genius, thank you very much. you want to cut the markets in cut the debt. that is what republican leaders sent to the white house. they have not heard a response. any response? >>guest: absolutely nothing.

thank you for having me. >>neil: senator, you also have been looking at a way to think of an alternative plan, just in case, august comes and goes and we do not move, an alternative plan to keep things going. right? >>guest: i have been calling it the debt ceiling budget but first it is irresponsible for the administration to scare the markets when they should try to calm the markets. it is irresponsible to assume they will get a debt ceiling increase without real pending controls. if we don't increase the debt ceiling we have to live in our means. that means according to president obama's own budget we would still be getting in $2.6 trillion in revenue starting in october and that still $800 billion more than we spentnd

president clinton paying 100 percent of the interest at $256 billion and 100 percent of social security at $760 billion and leave $1.6 trillion for essential defense, security, safety, and health spending and that would only be $200 billion less than our entire budget was 10 years ago so it is not the end of the world. it does not have to be a crisis if we plan for it and the administration is being highly irresponsible not at least putting in plan b. >>neil: and democrats and republicans, even to attempt to bring us to this, you whistled past the grave yard to say it is no big deal to not sort this out. >>guest: who brought us to the brink? two months ago the president had the 2012 budget and they said it

was the pollution and they -- was the solution and it was a stunning repudiation. >>neil: i am just saying, you may be right, but do colleagues feel comfortable pushing us to the brink that could lead to possible default? that the means justifies the end? >>guest: no, we want the president and democrats in congress to get serious about addressing our debt. they are not serious. the president's budget added $13 trillion to our debt. that is not serious proposal. when he cannot get one democrat to vote for his budget it proves our point were the democratically controlled senate does not pass a budget in 762 days. because they don't want to put a proposal up. they want to, according to chuck

schumer is point a finger at republicans. >>neil: you are right on the above about them not coming up with their own budget, but they are hoping this sets the stage for you to take them on while republicans in 1994 and 1995, and tested a shutdown and that will shut you guys down. >>guest: it is obviously they are playing a game of political chicken. they do not put forward a serious proposal and the only proposal on the table is the house budget and they just point at republicans and call us "extreme," and everyone in washington realizes the entitlement programs will not be around if we do not seriously addressing structural reform. we need a willing partner. one out of 370 million americans that can sign a bill, president obama, and he needs to get serious and come to the table.

>>neil: a last crack against this guy to crack, we will know if their trip from iowa was worth it and chris christie decides the heck with everything he has said. management jt sent over these new technical manuals. they need you to translate them into portuguese. by tomorrow. [ male announcer ] ducati knows it's better for xerox to manage their global publications. so they can focus on building amazinbikes. with xerox, you're read for real business. ♪ yeah ♪ [ male announcer ] it's not about what you can get into... ♪ ...but what you can get out of. ♪

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>>neil: and two big dinners planned tonight. one donald trump is hosting sarah palin in new york at a

special dinner and he has arranges for the former vice presidential candidate and in new jersey, chris christie is meeting with a number of iowa donors who have expressed interest in getting him to run for president. which he has repeatedly declined and rejected. so two very important dinners and the reporter from "wall street journal" not reading much into either. what do you make of this? >>guest: well, it is interesting, chris christie said in various places including on your program he is not running and is persuasive but the opportunity has to be intriguing. >>neil: it would be ride not to meet with the guys. ing >>guest: maybe just courtesy. you could say why is he meeting if he is not at least considering the idea can why not? >>neil: and now switch to sarah palin. the unexpected ... chat with

donald trump, himself a much talked about candidate before he pulled out. >>guest: this is a great opportunity for donald if he does more listening than speaking. he was coming una lot of criticism because he has a checkered history for tax and size of government issues but sarah palin on the other hand has interesting things to tell him about the role of government. >>neil: is she running him by meeting with trump he is coaching her? >>guest: i think he is in the running but the actions lately seem ... to suggest maybe at least she is thinking about it. this tour seems to go further than she might need to go if this is just ego and keeping her name out there. >>neil: but it is a time when a number of possible new possibilities including perry have indicated they could feel

this out and i am wondering if they feel this is a doable year in that is, 2012, for republicans. >>guest: it is doable for any republican if you think of high unemployment and president obama's favorable and unfavorable rating not bad considering how expensive gas is but not urging he is unbeatable so there are people who are thinking about it and if you are a government person this group of three people thinking of getting into the race is interest. and governor perry signed the tort reform last night and made texas the most business friendly place in the country leading the nation in job growth. compelling story. >>neil: if you are romney, are you anxious. >>guest: you might say this will political the antiromney vote and i am the establishment frontrunner, maybe that is good but on the other hand it does not make you feel good because there is a lot of reluctance for

conservatives to sign on to someone who created the prototype for obamacare. >>neil: but isn't he the guy to beat. >>guest: you could say ... this is what we said about romney the guy to beat in 2008 with the money and connections and new hampshire looking strong but john mccain won in wait 28 is -- in 2008 and there are a lot of money men drawn to him and party officials but voters may not have bought in yet. >>neil: so many dinners, so little time. thank you. after tonight's dinner the dish on your world, one of the donors trying to convince new jersey

governor chris christie to run. now we know what dominique has been doing in the $50,000 a month pad he has been renting. and guess who he has targeted? if you can believe it, this is if you can believe it, this is only now just getting dirty. man 1: send, that is the weekend. app grapgic: yeah dawg! man 2: allow me to crack...the bubbly! man 1: don't mind if i doozy. man 3: is a gentleman with a brostache invited over to this party? . vo: geico. 15 minutes could save you 15% or more on car insurance. [ male announcer ] in 2011, at is at work, building up our wireless network all across america.

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>>neil: cleaning ladies dirt on dominique strauss-kahn on accused him of sexual assault and now they want to target her credibility and our fox legal eagle, could this backfire? >>guest: it could backfire. if they get her on the stand and she is compassionate witness and they try to pick her apart with her past or anything like that, he is 32 year old single mom, working as a maid, if she starts

crying, that will be bad for the defense, especially with two men that are heading up the defense. >>neil: what if there is something in her past that raises the concerns. >>guest: this is the only defense, the defense has. it is consents so they have to target her credibility. they will say she knew dominique was a wealthy man. obviously he stayed in one of the finest hotels and she went door-to-door. >>neil: my reaction, who would pay $3,000 a night at any hotel. >>guest: but knowing what the patron pays, and he goes there. >>neil: so you assume there are others. >>guest: rain shield laws do not attach here so we will have to see if they can attack her sexual history. they are not going to be able to --. >>guest: there could be doubt

with her sexual history if she has criminal record, ever lifted anything, shoplifted or called wolf or made other claims. and the defense counsel are veteran and because of kobe bryant, after that rape case, especially the lacrosse case at duke and the information about the "victim," it is easier fore the defense. >>guest: maybe she was a prostitute, who knows, maybe she sued for sexual harassment in the past, or sued her employer, or had encounters with a civil suit but the sexual history will in the come in. >>neil: they would look whether there was d.n.a. and that has been argued back and forth. but would they fine evidence of wounds? >>guest: no, you don't have to

be "wounded" for rape to have happened with nonconsensual sex. >>neil: but then he is he says-she says. >>guest: right. >>neil: with no force ... >>guest: there is confirmation she had see monday on her shirt so the assault was oral sex and --. >>neil: but force ... >>guest: they will have to look for ton clothing or other signs. they would have that now. but her lawyer, his lawyer, i mean, said, we are going to smear her. he knew from the minute he took the client. >>neil: when you say smear? >>guest: anything. anything. anything they can fine. there was talk of her having h.i.v. and that is going to be

crossing the line if they bring in std and impugn her integrity because she has h.i.v. >>neil: why would that be ... >>guest: lots of layers, you have huge privacy laws. >>neil: for dominique what will it mean? >>guest: conviction or not. it is too early to tell but if she does not have a checkered past he is looking at conviction. i think it is in the future, a conviction. >>guest: it is extraordinarily difficult to establish concept and even with the huge lawyer team they hud have a female in the defense. >>guest: if you have all the money in the world you don't want a guy cross-examining a rape victim on the stand. >>neil: we are flying off the handle but we are still flying no wonder the airline fees keep

on coming. [ male announcer ] to the 5:00 a.m. scholar. thewo trains and a bus rider. the "i'll sleep when it's done" academic. for 80 years, we've been inspired by you. and we've been honored to walk with you to help you get where you want to be ♪ because your moment is now. let nothing stand in your way.

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>>neil: think you are being nickeled and dimed when you lie? they are to the tune of $22 billion, that is how much they made with the ridiculous fees on the surcharges so they are raining it in. and seeing as they are adding to the fees, here is what they are counting on. you will still fly. with me now is our guest from the consumer travel alliance. we whine about this, charlie, but we still my. >>guest: we do still fly.

and, really, ploy before my beef is not that we have to pay fees but the airlines hide the fees from us. out of the $22 billion, 60 percent of that is sold through travel agencies and the airlines will not tell the travel agencies, corporate travel agents, online travel agents or online mom and pop agents, what the fees are. that is indefensible. >>neil: in other words, it is one thing when you are apprised of what you are getting, such as paying extra for extra leg room but you don't know until after the fact that it has been broken down but the travel agents do not know? >>guest: the travel agents did not know and airlines have refused to tell. the department of transportation is involved in a rulemaking situation, and they did not attack this issue with the last rulemaking so they are ready to deal with it towards the end of

the year. ititit will be fascinating to se what happens. >>neil: they have lost a lot of money as a result of the fuel costs which makes up most of their cost. but they have to do this. i give them the benefit of that doubt but they have overkill with this. >>guest: well, we think they are in overkill but where they are really in overkill and it is deceptive and misleading when they do not tell us how much the fees are upfront. they say the fees are on their website but everyone does not search on the airline website. and most airline people could in the find it on their own site anyway. >>neil: if we knew the sir -- surcharges are they afraid we will not my? >>guest: the total cost would lock a lot more expensive.

you would go online and say, well, i am traveling from a to b with one checked bag and i want a reserved seat and my family sitting four across, and, then, if they release the fees you can get the total cost and compare it from american airlines to u.s. air but you cannot do it. >>neil: well put, charlie. thank you very much. i want you to meet our net cruise director, 100 years after a ship set sail, is there guy at the helm when our ship of state sinks? i love that my daughter's part fish.

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the two trains and a bus rider. the "i'll sleep when it's done" academic. for 80 years, we've been inspired by you. and we've been honored to walk with you to help you get where you want to be ♪ because your moment is now. let nothing stand in your way. learn more at keller.edu. if president picked a new commerce secretary, so why do i feel 100 years to the day it set sail? he has the equivalent of the cruise director on the titanic. don't get me wrong, former utility ceo john bryson brings

a lot to the table but i wonder if he changes the place setting on the table. it ain't a great table. if i saw it at a restaurant, i'd avoid the table. it'd avoid the restaurant. back to my titanic analogy, i'd avoid the dining room on the chip. it's not the ship, but sadly on i'm already on the ship. they're all on the ship. the ship has hit the fan. nothing i heard today in the president's lavish praise on mr. bryson or the commerce secretary led me to believe they'll do much to alter ship's sorry course. i'm not saying we're headed for an iceberg, but let's just say rough waters. bragging about a guy, i don't know, solar energy does it will to ease concerns we're still not going underwater. let's just say on the whole clean energy, renewable energy, been there, pushed that. but always missing this. jobs. we need them and fast. after two-and-a-half years we ain't exactly getting them at

all. time for a midcourse correction. but sadly i get a guy will keep the same course. steady as she goes but hardly steady. that's why it would have been far better to hear the fixes the commerce secretary. not pie in the sky technology with a history of sinking. but very real regulatory tax relief with a proven history of getting businesses and or economy cruising. it'd like to be wrong. trust me. i just kind it a little eerie that 100 years ago to the day, the titanic first set sail, we're setting to take on water all over again. which is why when i heard the news of bringson appointment, contrary to all the rumors, i did not, i did not say oh, no! i simply said oh, ship. go ahead. play that back.